As of the time of this writing, the Republican tax plan has not been signed into law. The proposal has plenty of interesting provisions, to say the least, but most importantly to taxpayers, this legislation would NOT come into effect until next year (Jan. 1, 2018).
This means (A) there will be no impact on your 2017 tax filings which are due on April 15, 2018, and (B) there are a number of end-of-year tax tips that are still effective under the current tax laws. Your McAllen CPA at Abigail Y. Murray, CPA, LLC. wants to add a little joy to your holiday season by sharing with you 14 tax saving tips for both individuals and small business owners.
1. Defer income until 2018. If you have the opportunity to defer income, you may want to consider doing so, especially if you think you might fall into a lower tax bracket in the 2018 tax season. A few options might include delaying an end-of-year bonus. This is a good strategy to move some taxable income into the following year.
2. Increase payments to increase deductions. If you’re making payment on deductible expenses such as school interests or medical expenses, increasing your payments on these deductions can have an effect on your 2017 taxes.
3. Increase withholdings to lower taxes. Does it look like you’ll owe some hefty taxes this year? You can fill out a W-4 and ask your employer to increase your withholdings for the rest of the year to lower down what you owe on your federal income tax. One of the benefits of doing so is that the IRS views withholdings as being paid out evenly throughout the year, which can help you to cover a quarterly tax payment.
4. Contribute the maximum amount allowed on your retirement plan. Contribution to your IRA or employer-sponsored retirement plan can increase your deductibles and lower your taxable income for the year. Try to contribute the maximum amount allowed to reach full benefit.
5. Retirees! Take required retirement plan distributions. Individuals who reach the age of 70 ½ must typically accept required minimum distributions (RMDs) from their retirement plans. Frustratingly enough, failing to do so can lead to a penalty of 50% of the amount that was supposed to be distributed to you.
6. The gift of giving can actually save you. Donating to charities from a taxable account (traditional IRA or 401(k) plan) can lower your tax bill. You should also consider accelerating charitable gifts for the road ahead. The upcoming year could see a reduced value of these deductions.
7. Sell underperforming investments. You can reduce taxes on investments by selling investments, stocks, and bonds that have lost value and generated capital loss. This can potentially help to lower tax liability that you might have on your investments.
Tips For Small Businesses
1. Preparation is key. You’ll need to prepare for the hit to your cash flow by reviewing financial reports with your bookkeeper or accountant. You’ll be able to make the proper adjustments by having an idea of your business’s potential tax bill. This will also open the door to discussing whether or not it makes more sense to pay quarterly estimated taxes rather than carrying that large burden in April.
2. Defer income and increase expenses. Your small business is going to be taxed on its profits. There are a few simple tax tips that you can follow in order to defer revenue and increase expenditures, just make sure that your small business passes through entities reporting business income and falls under a Schedule C personal tax return. You can contact the McAllen CPA of Abigail Y. Murray, CPA, LLC. if you aren’t sure.
- Defer income by depositing less money into your business bank account during these last few months of the year (assuming you can handle the cash flow), send out invoices for the month of December late in the month, and defer customer payments until January 2018 if possible.
- Now comes the easy part – spending money. Assuming that cash flow will not hurt your business for the next couple of months, pay as many business-related bills as possible, consider making some necessary upgrades to equipment (or brand new purchases), purchase offices supplies in bulk that you know are necessary all year round, and contribute to charity.
3. Bosses deserve retirement savings plans too. In the process of running a small business, you might be overly concerned with meeting the needs of your employees and their retirement savings plans. While this is an awesome approach to business ownership, it doesn’t hurt to start contributing to your own retirement plan as well. Whether you are opening a Simple IRA, 401(k), or profit-sharing plan, the contributions you make for your employees and yourself are generally tax-deductible. Make sure that you establish the plan before the end of the year to get the deductions for 2017.
4. Take advantage of startup costs. If you’re a startup business, you may be able to deduct up to $5K in startup costs and an additional $5K in organizational costs. These deductions can be applied to a number of expenses including advertising, employee training and wages, legal and accounting fees, and more. Be aware that these deductions no longer apply after you’ve hit $50K in expenses or organization costs. More than $55K and no deductions will be allowed.
5. Don’t forget to make a charitable contribution. If you’re looking for a tax deduction, donating to a charity, sponsoring at a charitable event, or donating inventory are all generally beneficial to your business.
6. Don’t forget about home, auto, and lunch deductions. As a small business owner, there are a number of deductions that you may be eligible for if you work out of a home office including mortgage interest, insurance, utilities, maintenance, and other items. You can find instructions and IRS Form 8829 here.
Alongside home office deductions, you can also deduct car expenses if you use it for your small business. The IRS allows you to claim standard mileage rate and actual car expenses that include gas, oil, tires, repairs, insurance, registration fees, and more.
Last, but certainly not least, are business-related lunches. As per the IRS, generally, only 50% of business-related meal and entertainment expenses are allowed as a deduction. Still, this can be a meaningful deduction for your business if you find yourself constantly having lunch or dinner meetings with clients.
7. Use a tax professional to get the most deductions and benefits. You may be tempted to handle your taxes alone or to utilize a simple tax service. But you should really consider having your taxes prepared by a tax professional like a CPA, who has the training, experience, and industry know-how to really delve into those taxes and find you the best deductions for your needs. The savings you’ll receive will definitely offset the costs and you can find comfort in knowing that everything was properly filed.
For more tax tips and financial guidance, call up the professionals at Abigail Y. Murray CPA for the support you need and tax expertise you deserve.
Wrap up the tax year on the right note and save yourself some money for when tax season comes around in a few months. And don’t forget to call on the knowledgeable and experienced experts at Abigail Y. Murray CPA in McAllen for the support you need.
Contact our McAllen CPA today at (956) 800-5600 to start making plans for the upcoming year.
September is a busy month with people and their families getting back into the groove of the school year.
Your McAllen CPA, Abigail Y. Murray CPA, knows that it is also a busy month when it comes to taxes – for individuals, businesses, and corporations alike. There are a number of important deadlines coming up during September that are worth keeping an eye on.
There is also plenty you can do to both catch up and get ahead when it comes to your tax situation.
A Few Key September Tax Deadlines
Labor Day is one of the few, big national markers in September but the following dates are worth keeping in mind as well:
- September 11 – This day will forever be important in our country for obvious reasons. However, it is important to know that it is also a critical deadline for people whose income relies heavily on tips. For all employees who received more than $20 in tips during August, it is the cut-off date to report them to their employer.
- September 15 – The 15th is a deadline for a number of different entities. For individuals, it is the due date for the third installment of their 2017 estimated tax. This applies only to those people who have chosen not to pay their tax through withholdings. For partnerships that were given a 5-month extension on their 2016 tax return, the 15th is the deadline to file their return using Form 1065. It is also a due date for both corporations and S-corporations.
There are a number of other deadlines throughout the month that are worth reviewing as soon as possible.
Smart Tax Moves You Can Make
Taxes are something that can leave us scrambling from year to year and 2017 is no different. A few smart tax moves to consider this month include:
- Many people took the available extension on their 2016 return to give themselves more time to pay.
While the official deadline is not until October 16th, you can avoid accruing additional interest and get all that annoying paperwork out of the way by filing this month. The sooner you get it done the sooner you can start planning for how to best use your return money.
- With so many people heading back to school, you should also start looking into any and all available educational tax breaks. The cost of school is a difficult thing for many to manage. From kindergarten to college, education can come out costly.
One option to check out is the Coverdell Education Savings account, which can help pay for elementary and secondary school items like computers.
The American Opportunity Tax Credit has the same function for college students and covers important expenses like textbooks.
- While we have been fortunate here in the Rio Grande Valley to escape the devastation of Hurricane Harvey, it is important for everyone to be prepared not only for the physical effects of a disaster but the financial ones as well.
The IRS has announced tax relief efforts for the counties that were hit hardest in Texas, as well as neighboring states, by Hurricane Harvey and the same will likely be true if our region is affected in the future.
Staying informed in the aftermath of disasters is important to help family members that live in cities hit by disasters and to plan ahead in case your family is in a similar one in the future.
Don’t let September pass you by without meeting tax due dates and making preparations for tax season!
September is a month of transition from the slower pace of summer to the hecticness of the school year. It is also an important intermediate step between last year’s and this year’s taxes.
At the McAllen CPA office of Abigail Y. Murray CPA, we are here to help guide you through all the different deadlines that your personal tax situation faces. Our staff has the expertise to make that transition quick and problem-free.
Contact us today at 956-800-5600 to set up a consultation. Let us work with you to take care of all your tax questions.
If you have an employer-sponsored retirement plan, such as a 401(k), you have a good retirement savings foundation as these plans are generally easy, convenient, and rewarding to maintain. Contributions to your 401(k) plan are deducted from your paycheck, tax deductions are available up front, and annual contribution limits are sizeable.
But there is still a case to be made for an individual retirement account (IRA). An IRA savings account is designed to help you prepare for retirement while offering some tax advantages. With an IRA, you’ll also have the ability to save more for retirement and diversify your investment options.
However, the type of IRA that best suits your needs will depend on your income, filing status, and future estimated tax rate.
There are two types of IRA accounts: the traditional IRA and the Roth IRA. The traditional IRA route would be a stronger option for you if you expect your tax rate to be lower in retirement. In contrast, a Roth IRA would work in your favor if you expect your tax rate to be higher in retirement.
Deciding on the best course of action for your financial investments and retirement savings can be a daunting task. But you don’t have to handle your financial future alone. It’s wise to explore other retirement options to maximize your future savings; it’s also wise to seek outside professional help to achieve this goal.
An experienced McAllen CPA firm like Abigail Y. Murray, CPA, LLC. can help ensure that your savings and investments are well cared for.
With a traditional IRA, your contributions are tax deductible for federal and state tax returns. It is worth noting that by lowering your taxable income for the contribution year, your adjusted gross income is lowered, too.
This means you may qualify for other tax incentives that you would not have been eligible for otherwise. Instead, you pay taxes on the distributions you take in retirement or from withdrawals made prior to retirement. This applies to qualifying withdrawals of up to $10,000 made before the age of 59 ½.
While you will be exempt from the 10% early-withdrawal penalty for qualifying expenses such as first time home buyers, higher education, and unreimbursed medical expenses, you will still be required to pay taxes on the distribution.
Investment potential is not diverse when it comes to traditional IRAs. The types of assets that this type of account can hold is limited to publicly traded stocks, bonds, mutual funds, and bank CDs.
Tax advantages for a Roth IRA function differently than a traditional IRA. Tax breaks are not provided for contributions but withdrawals made in retirement are not taxed with Roth IRAs. Contributions – not earnings – can be withdrawn from a Roth IRA without having to pay penalty fees or taxes under the age of 59 ½.
Tax-free withdrawals of up to $10,000 can be made, too, for qualifying expenses, given that at least five tax years have passed since the first contribution on the account.
While investment assets are limited in traditional IRAs, Roth IRAs present the opportunity to invest in individual stocks, index funds, lifecycle funds, and other alternative investments.
Income Considerations and Limitations
There are no age limits for either type of retirement plan, though the same cannot be said for income limits and restrictions. In 2017, contribution limits for both Roth IRAs and traditional IRAs were $5,500 or $6,500 for those 50 and older.
But, consider that under traditional IRAs, anyone earning income under the age of 70 ½ can contribute to their retirement plan. Tax deductions on contributions will depend on income, marital status, and coverage via an employer-sponsored retirement plan. The IRS website offers plenty of details.
Income-eligibility restrictions come into play with Roth IRAs. As of 2017, single tax filers must have a modified adjusted gross income (AGI) less than $133,000 to contribute to a Roth IRA, where phase-out begins at $118, 000. The modified AGI for married couples filing jointly must be below $196,000, where phase-out begins at $186,000.
Reduce the stress of your financial planning by relying on the McAllen CPA professionals at Abigail Y. Murray, CPA, LLC.
Our experienced McAllen financial advisors will be able to provide you with guidance in determining which type of retirement account would best suit your needs.
Contact us today at (956) 800-5600 to begin your journey to a more prosperous and secure future.
It only takes a quick step outside your front door for you to know that summer is in full force here in McAllen and the Greater Rio Grande Valley. The sun is shining brightly and everyone is searching for a way to enjoy the outdoors.
Whether you head to the city pool or are looking at more organized summer activities, we here at Abigail Y. Murray CPA in McAllen, Texas know that you might have to reach into your pockets to pay for those summer programs you and your family can enjoy.
But that doesn’t mean that you can’t save some money! There are plenty of cost-cutting and tax-deductible activities out there for those of us who do our homework.
Summer Fun Doesn’t Have to Cost a Ton
The first activities to start looking into are the ones that will not cost your family anything at all. These opportunities are all around you and ones that you may already be well-acquainted with.
Your local park and recreation department is sure to have a number of activities and events you and your family can enjoy at little to no costs. Your church and other youth groups will also likely offer summer programs, such as vacation Bible school.
A little Google searching will also turn up free arts and craft events as well as day camps occurring throughout your city.
One of the best places to find free activities for your children is at your local library. These are designed not only to keep them learning while away from school but also offer outlets for their imagination and creativity.
A Membership Pays Back in More Ways Than One
Even if what your city library is offering comes with a price or other membership fee, you will probably still be able to qualify for a tax deduction on that cost at the end of the year.
The same is true for memberships at many museums, zoos, and other facilities all over the state and country. Having a membership with these sorts of organizations will not only provide an enjoyable activity for you and your family to enjoy but will also likely be tax deductible.
Your membership has the added bonus of helping support these organizations in your community. The money brought in not only helps to maintain both facilities and staff but also promotes their growth.
The scope of nonprofit organizations is much wider than just animal care centers and museums, though. Your community is sure to have other places you can find something that fits your family’s varied interests.
Paying For Childcare Can Be Tax-Deductible
Sometimes working parents (and those looking for work) have to enroll their children in summer programs while they are on the clock, as de facto child care.
This usually applies to parents with children 13-years-old and under and these programs can come with added costs. Just having someone to provide child care is not enough to eliminate stress because of the side effect it can have on personal finances.
If that’s the case, there are five important facts for everyone to remember about The Child and Dependent Care Credit, which is aimed at providing financial relief from what you pay for childcare in the summer, as well as the rest of the year:
- Overnight camps and other forms of care can’t be used toward this credit.
- Day camps will likely be covered.
- Where you kids are being taken care of, whether at home or at a facility away from your house, will not count against you if you qualify for this tax credit.
- You can be credited up to 35% of expenses that qualify for this credit; the total is determined by your income
- Up to $3,000 of expenses for one child and $6,000 for two can be used to determine how much you are credited.
There are a number of items to consider when determining if someone qualifies for this tax credit.
For anyone interested in learning more please feel free to contact our McAllen, Texas office today or you can look through Publication 503 from the IRS.
Abigail Y. Murray CPA, LLC is here to answer any questions you might have about how summer activities can affect your taxes.
The last thing anyone wants to worry about is what effect the money going into enjoying the summer months will have on the rest of your year.
Abigail Y. Murray CPA is happy to remind you that there is no cause for concern. There is a good chance that the plans you have for your kids, including camps and other programs, are likely to come with the added benefit of a tax deduction or credit at the end of the year.
Contact us today at 956-800-5600 with any questions you have about your summer finances. Don’t go through the rest of the year without the answers you need.
At some point in life, many of us worry about not being able to make ends meet and it can become a very stressful situation to bear. Being fired or laid off from your job is a very common, yet unpredictable, part of life.
But even in the face of such adversity, we here at Abigail Murray, CPA, LLC wholly believe you can improve your situation with the right financial planning.
Before panic takes over, it’s important to take a step back and analyze a few things in order to take control back of your financial situation.
Consider taking the following steps in the face of unemployment:
- Take advantage of programs like unemployment.
Very often, both big and small organizations go through downsizing, which is the elimination of staff positions on the operating payroll. Downsizing is intended to be a permanent downscaling, and a layoff is intended to be temporary, but regardless of which circumstance your situation falls under, you may be eligible for unemployment and other governmental aid.
You can get in contact with your state’s unemployment benefits office to obtain more information about your potential eligibility. If you discover that you are in fact eligible, we recommend that you apply for unemployment as soon as possible.
- Revise your health insurance plan.
Your health insurance was probably covered by your previous employer, but it doesn’t necessarily mean you will lose it if you no longer work there. You can speak with the company’s Human Resources department about continuing your health coverage. This option can be an expensive one though and perhaps getting a new policy will benefit you more.
You may also be able to enroll in marketplace health insurance for the rest of 2017. Individuals who have recently lost their job may be eligible for marketplace coverage.
- Prioritize your expenses.
It can be a bit terrifying having to prioritize what bills are more important than others, but in the midst of a financial crunch, it may be necessary to make some sacrifices and pay the necessities first. The essential expenses to pay off should include rent or mortgage, utilities, food, and insurances.
- Create a budget
Some companies may offer a severance package, but without a secure income, it is highly unlikely that money will last very long. We cannot stress how important it is to organize your financial responsibilities and create a personal budget based on the most vital expenses – especially if you can’t rely on savings.
- Speak with your creditors.
Even with the help of a severance package and unemployment benefits, it may be difficult to keep up with all your payments. Because you don’t want to ruin your credit during this time frame, you should immediately reach out to your creditors to let them know about your situation.
Some creditors may offer short-term hardship programs that will at least help to reduce your monthly expenses, but they usually won’t last longer than 6 months to a year.
Don’t wait! The only way to find out is to call and ask.
- Make cuts where necessary.
This goes hand-in-hand with creating a budget; you’ll need to recognize where you are making unnecessary purchases and cut back as needed. This can include certain luxuries such as cable costs, movie streaming services, cell phone related costs, constant restaurant dining, and the likes.
- Take the necessary steps and start looking for another opportunity.
The most important thing to note is that you must not lose hope nor confidence when becoming unemployed. Although for some the experience can be overwhelming, we encourage you to remain optimistic. Update your resume or pick up some additional training as needed.
If you acquire a job in the same field you were previously in, you can claim those job search expenses as itemized deductions on your tax return.
- Don’t stop living.
The stress of being unemployed can often lead you to neglect your own health, relationships, and personal well-being. However, it is important that you maintain some semblance to your “normal” lifestyle including exercising, eating properly, maintaining relationships, and generally just keep up with your hobbies.
Don’t make a tough situation harder by ostracizing yourself from loved ones. Keep up with positive activities and this will give you the energy and confidence to see the situation through.
Abigail Murray, CPA, LLC wants to help you plan financially for the good times and the bad times. Contact us today at (956) 800-5600 to learn more about preparing yourself financially for all types of situations.
It’s here once again, citizens of the Rio Grande Valley, and no, we don’t mean the end of football season. While our beloved state sport is going away for a couple of months, there’s something else on the horizon that needs our attention just as much as a Cowboy’s game—tax season.
That’s right. Tax season is here, and with it, confusion, frustration, and perhaps a little bit of worry.
But it doesn’t have to be that way.
Here at the offices of Abigail Y. Murray CPA, we’re absolutely excited about tax season (yes we’re a little different like that). Not only do we get to showcase all of our abilities as professional CPAs, but we also get a chance to talk with and answer all of the questions our clients and friends may have.
We’ve probably heard every type of tax-related question, and that’s why we’ve assembled some of the most common questions people ask, so you can be in the know.
If you don’t find your question below, just give us a call at (956) 800-5600, and we’ll be sure to point you in the right direction.
Now without further ado…
When are my taxes due?
The due dates for taxes this year is April 18th. While taxes are usually due on the 15th, we get an extra three days this year because of the weekend and a federal holiday on the 17th.
If you’ll be filing for an extension this year, you’ll have until Oct. 16th, but be aware—you will still have to pay what you estimate you owe by April 18th.
How can I file an extension?
Sometimes life gets in the way, so if the April 18th deadline doesn’t look like a “can do” for you, then you’ll need to file for an extension. It’s important to recognize that an extension DOES NOT get you out of paying for due taxes by the deadline, but rather gives you extra time to file.
Why should you file for an extension then? For one, an extension will stop a late-filing penalty of 5% of the unpaid tax for each month you’re late (which can accumulate to up to 25%). Then there’s the late-payment penalty of 0.5% for the unpaid taxes for each month. Let’s not forget the interest rate which runs at the federal short-term interest rate plus 3%.
What’s new this tax season?
Not much has changed since the previous tax year; there’s a provision that allows seniors to donate IRA withdrawals to charities without having to declare them as taxable income, and the personal exemption deduction has risen from $4,000 to $4,050.
As previously mentioned, the tax filing deadline has moved to April 18th this year.
Perhaps the biggest news this year is that the IRS said they wouldn’t begin issuing refunds until after Feb. 15th on returns that claim the earned income tax credit or additional child tax credit.
The 2017 tax season will likely see much bigger changes because of a new presidency and governing Republican body in Congress. Check back here frequently to find out new information as the year rolls along.
Do I need to file a return?
It depends on a number of things including your filing status, age, and the type of income you receive. Most full-time workers are going to need to file a return, but things can get a bit tricker for individuals 65 and older.
You can figure out whether or not you need to file by using this online IRS tool.
Even if you aren’t required to file, it still might be worth your time to do so, as you might still be eligible to qualify for a refund (the IRS stated that about 70% of Americans are expected to qualify for refunds this year).
What documents do I need to file my taxes?
Generally, most taxpayers will need their W-2 form, 1099 tax forms, and forms that come from their banks. Other information you might need, depending on how you are filing, will include social security numbers of dependents and receipts from charitable contributions. Don’t forget to round up information on interest paid to school loans.
When can I file my taxes?
The IRS began accepting electronic returns on January 23rd.
You have until 11:59 PM on April 18th to file your taxes electronically, but this isn’t the best idea, as a bad internet connection or faulty computer can lead to issues and penalties.
If you plan on filing your taxes through “snail mail,” you’ll want to send them in much earlier, and have your return and payment postmarked by April 18th. Some post offices stay open late on Tax Day, so give your local office a call to find out if they do.
If you file electronically, you should have the option to pay via online use the IRS’s Electronic Funds Withdrawal function.
Who can I claim as a dependent?
The most obvious choice for many taxpayers is going to be children, but those aren’t the only people that you can claim. In some cases you are able to claim elderly parents, significant others, and some relatives depending on the status of your relationship to them. There are certain standards in place, but if applicable, a dependent can provide you a $3,900 deduction.
Is there anything available for me as a parent?
Kids are a blessing—and not just because you can take advantage of them in your taxes by claiming them as dependents. If you have a child, or children, you can benefit from deductions and credits including:
- Child and dependent care tax credit—This credit is for parents who have to pay for childcare and it’s worth up to $1,050 per child.
- Earned income tax credit—This is for low to middle income working Americans and can be as much as $6,044.
- Child tax credit—This credit can be used for those of us with larger families and can get you up to $1,000 per child under the age of 17.
How long will it take me to get my tax refund back?
This year, most individuals will probably see a longer time frame in getting their refund back. That’s because to combat tax fraud, the IRS is going to be more stringent with filers who have either claimed Earned Income Tax Credit or the Additional Child Tax Credit.
What this means is that no one will see their refunds until late February at the earliest. Additionally, some refunds may face additional review before being sent out. If things go smoothly though, you should be issued a your tax refund in the standard window of 21 days from the time they get your return.
For how long should I keep my records?
The IRS recommends that you keep your tax documents for up to three years. If you have happen to get audited, this is generally how far back they are able to review.
If they suspect tax fraud, underpayment of income tax, or if you’ve written off worthless credits, they can go back up to seven years. Always keep tax documents, receipts for business expenses, forms for charitable donations, and the likes.
Don’t stress this tax season. Call up the professionals at Abigail Y. Murray CPA for the support you need and tax expertise you deserve.
Abigail Y. Murray CPA isn’t just another accounting firm, and you’re not just another customer. Save yourself the headache this year and get an experienced accountant on your side. Our knowledge, experience, and up-to-date techniques means we can make this tax season the best one for you yet—who would’ve thought that was even possible with taxes!
Contact us today at (959) 800-5600 and let’s make this tax season a great one for you.
The Treasury Inspector General for Tax Administration (TIGTA) recently sent a report to the IRS that noted a need for improvements to protect employers that use payroll providers. The TIGTA audit report found that several payroll providers had not been fulfilling their tax reporting and payroll tax obligations.
As an employer, it is important to know how these changes may affect you, and how they are designed to help reduce risks related to employment tax fraud.
Unfortunately, what was uncovered was that several payroll companies were impounding tax on behalf of their client and not remitting them to the Internal Revenue Service.
The report classified several types of third party providers:
- Basic Payroll Service Providers (PSP) that prepare signature-ready paper returns for employers to sign and file.
- PSPs that impound and pay taxes.
- Reporting agents are another classified third party provider that work similarly to traditional PSPs, but are also able to file 8655 forms, process tax returns, sign as reporting agents, as well as impound and pay taxes.
- Section 3504 agents that file 2678 forms with the IRS, report on aggregate returns, and withhold and remit taxes.
- Professional Employer Organization (PEO) that file returns and pay taxes with the PEO Federal Employer Identification Number.
The lack of processes to establish links between employers and third party providers has made it difficult for the PSPs and IRS to effectively resolve issues. Even with the current 8655 process in place, its inaccuracy often results in an inability for the PSP to be recognized as a reporting agent.
The TIGTA has made five recommendations for improvement:
- The IRS can partner with the Bureau of the Fiscal Service to develop a plan to utilize the Electronic Federal Tax Payment System (EFTPS) in order to link an employer with the PSP. The Internal Revenue Service agrees with this stipulation.
- While the IRS partially acknowledges this 2nd recommendation, which is establishing a program where employers can inform the IRS of their PEO relationship and establish a certified PEO system, there is no monies to effectively enforce this program.
- The IRS agrees with the recommendation to develop a process to ensure Section 3504 agents’ indicators are accurate.
- PEOs can attach a Schedule R to the 941 filed each quarter. The IRS noted that they can not legally require non-certified PEOs to accomplish this.
- The Commissioner, Wage and Investment Division can create a process to ensure 8655s are accurately caught in the IRS system. The IRS concurs with this recommendation made by TIGTA.
Employers are encouraged to check remitting tax deposits by enrolling in EFTPS online or by calling (800) 555-4477 for an enrollment form. It is the responsibility of the employer to file employment tax returns in a timely manner and to make the appropriate payments of employment taxes for their employees as required.
With tax season just around the corner, make sure you have your system and files in order. If you aren’t sure where to begin, contact the accounting offices of Abigail Y. Murray, CPA, LLC today.
The holiday season is full of cheer, joy, family, food, and good will. That’s why this is one of the best times of the year for charities to solicit donations. And while the holiday season allows us the opportunity to reflect on our blessings and offer support to others, it’s also an opportunity for unscrupulous scammers to pretend to be legitimate charities and cheat hard working people from their hard earned money.
The holiday hustle and bustle may also mean you forget to properly document your donations needed for tax purposes.
Here are five charitable donation tips to help you avoid scammers and reap the benefits of giving before the end of calendar year.
Do your research to avoid charity scams. Giving to a meaningful cause is commendable, but you’ll need to do some research prior to donating to ensure you are contributing to a legitimate charity. Be extra vigilant against charities that sound similar to nationally recognized organizations. These fake charities will likely use names and websites that sound like legitimate organizations in order to draw you into their snare.
Take the time to double check their legitimacy by using the IRS.gov feature known as the Exempt Organizations Select Check, that helps you to find real, qualitiy charities to which donations may be tax deductible. In fact, more than 1 million charities are registered with the Internal Revenue Service, so do some investigation as needed to find the best organization that truly gives the majority of their revenue to a worthy cause, rather than their operating expenses.
You can also confirm a registered charity by checking with Texas’ Department of Justice Approved Charitable Organizations list found on their website.
Confirm that your donation is tax-deductible. Many types of contributions to an approved charity are tax deductible, but you’ll want to confirm beforehand by making sure they are qualified by the IRS. Also, keep an accurate set of records by getting a written acknowledgement or receipt for your donations.
In order to claim a charitable deduction you’ll need to itemize your deductions, and as previously mentioned, only contributions to qualified charities are deductible. Furthermore, monetary donations such as cash, check, or credit card, are only deductible if you have a record of the contribution. A receipt or letter from the charity is sufficient and should indicate the name of the charity, the date of the contribution, and the amount. If a contribution is made via payroll deduction, then a verifying document such as a W-2 should be maintained as proof of the donation.
Always make sure to keep the pledge card showing the name of the charity.
Keep an eye out for personal information thieves. There are several warning signs that you may be dealing with a scammer. Keep an eye out for thieves who may ask for information such as your Social Security number or for personal banking passwords. This information can be easily used to steal your identity and money.
While using your credit card to make donations is quite common, you’ll want to be exceedingly careful when providing this information to a charity. Once again, make sure that the transaction will be a legitimate transaction with a legal, verified charity.
Non-cash contributions are deductible too. Non-cash contributions to organizations can include food, art, jewelry, clothing, furniture, electronics, appliances, and linens. The deductible amount is the fair market value (FMV) of the items at the time of donation, and just as with cash donations, the donation must be properly documented in a detailed list of what was given and the charity who received the gifts.
When the FMV of the gifts total $250 or more, the charity must provide acknowledgement of the donation. A non-cash contribution of $500 or more requires additional recording keeping including the IRS Form 8283 and a donation of $5,000 or more (such as a property) requires a certified appraisal.
There are other ways to give and make a positive impact. The holiday season always tends to bring to mind the blessings that we have; giving back doesn’t always have to include money or items. There are tons of volunteer opportunities available for citizens to give something back during the season. Volunteer South Texas is a local organization that helps to provide volunteer opportunities all throughout the McAllen metro and Rio Grande Valley.
McAllen CPA, Abigail Y. Murray, LLC, is here to answer your questions about 2016 donations or about the documentation required to claim deductions.
Charitable contributions are only deductible in the year in which you made them. If you have any questions regarding the process of utilizing your donations as a tax deduction, make sure to contact the office of Abigail Y. Murray, CPA, LLC at (956) 800-5600.
Gaining 15 pounds and balancing a social life during freshman year aren’t the only things your child will have to worry about once the school year starts up. The college experience is partly about becoming a responsible adult, and perhaps most importantly, that means learning how to live on a budget. Since college is the ideal transition period into the responsibilities of adulthood, it’s also the ideal time to talk to your college student about personal finances.
We know that money can be a stressful topic to discuss, but getting your freshman accustomed to creating and managing a budget will have some positive long-term effects. As a parent, you should try to help your child avoid poor spending habits and teach them to avoid unwise financial decisions. All it takes is a bit of guidance and some simple financial tools.
Even as an adult, setting and achieving your financial goals can be tough. It’s okay to seek a bit of help every now and then. That’s where Abigail Y. Murray, CPA, LLC comes in. Your financial success, and that of your child’s, is our goal. We offer services to help set you on the right path to personal financial success, so give us a call today and let’s get started.
Check out the following tips to ensure your child starts college, and their financial journey, on the right foot.
Make a Budget. Simply being aware of the flow of money will help them realize that their money pool is not limitless. A lot of high school students have the luxury of mooching off their parents’ finances or relying on a small income from a part-time job. However, once college life kicks in, and all the expenses associated with it emerge, your child’s financial responsibility should be front and center – just like their studies. A budget will serve as the foundation for your child’s financial development.
Your child will need guidance in making wise financial choices that fall within their budget limit. While it is tempting to take over your child’s new financial responsibilities, because you have much more experience in the area, let them take the reins. Your freshman should know what is financially feasible within his or her budget and how to allocate funds for a variety of expenses.
Beware of credit cards. A first-time credit card holder, who is also a student strapped for cash, should never make the decision to open a credit line alone. In fact, credit card companies feed off desperate college students by promising free items and rewards with every credit application. Before long, students are stuck with high interest charges and credit card debt on top of student loan debt. If your child wants to open a line of credit, or if you feel they could benefit from a credit card for emergency situations, then find the best option together. Sit down and go over the pros and cons of several cards. Look for cards that have relatively low spending limits and offer cash back rewards or points.
In a joint, or student account, you can deposit an “allowance” in his or her account or help them to maintain an emergency fund. You child should be aware of how much is available in the checking account to avoid those expensive overdraft fees, or to protect your student’s checking account from those unexpected charges, you can turn off overdraft protection all together. A debit card will teach your child how to manage funds and to understand that money is limited.
Shop smart. With textbook prices on the rise year after year, the thought of staying on budget seems far-fetched. Luckily, you and your child don’t have to shell out hundreds of dollars for textbooks every semester. Just be mindful of a few tips and tricks. Shopping as a financially responsible adult often involves looking for the best deals and coupons, and this is the perfect time for your student to learn how to do just that. School supplies and college textbooks can rack up a pretty bill, so shop around (especially online) for the best deals. Rather than purchasing textbooks at the university library where prices can be unreasonably high, shop on websites like eBay, Chegg, or Amazon. These online retailers offer more than schoolbooks and supplies at a discount, they also offer rental options too. Renting textbooks can result in big savings. You should also encourage your child to search through campus bulletins for used textbooks that other students may be selling.
College professors sometimes ask for the latest version of a textbook when the older version will do just fine. Your student can email his or her professor to find out if a previous version of the textbook is allowed or if the textbooks on the syllabus are mandatory or just suggested reading material. At the end of each semester, your child can sell his or her used textbooks to other students for some extra cash. A few great places to post about used textbooks are the campus bookstore, social media, and online book retailers. The money earned from your child’s used textbook sales can go toward new books in the upcoming semester.
Enforce limits. Smart spending is not always achievable. Nobody is perfect, and we all like to splurge once in awhile. If you teach your student how to weigh the pros and cons of most purchases, then they’re more likely to make sound financial decisions. Work together to set a dollar amount – like $50.00 – and let your child know that any purchases above that amount should be carefully considered. Identify expenses that are priority against expenses that are simply luxuries – it’s basic economics of wants versus needs.
Another unfortunately reality is that not every child is lucky enough to have a full-ride, all expense paid, college experience. If your child is relying on student loans, make sure the money from those loans are being spent exclusively on school. Tuition, books, housing, and food plans fall under school expenses. Everything outside those necessities should be paid for with money that hasn’t been borrowed. Extra expenses should be funded with a job or work-study. If you know your child will want to enjoy a comfy social life with a comfy shopping allowance, then encourage him or her to get a part-time job, especially if your child is good with time management. Freshman should be taught to live frugally.
Go digital. College students probably won’t sit down to keep track of their finances on a spreadsheet, and that’s okay. Considering that your college kid probably spends a lot of time on their phone, take advantage of this. There are better options available that cater to a college student’s lifestyle while making money management easy and convenient for them. Mobile banking, for one, offers a host of services to keep your college student on track, like payment alerts or quick money transfers. Some phone apps offer integrated money management services that can connect bank accounts in one interface and send alerts for upcoming payments. In today’s fast paced tech world, budgeting is made more accessible for the busy and distracted college student.
It’s no secret that a good portion of American households are living with some substantial debt. In fact, the average U.S. household has about $16,000 in credit card debt and $130,000 in total debt. Considering it takes a mortgage, car loan, credit cards, and students loans to be an official adult, it’s no wonder that the vast majority of us fall into this category.
But there is a light at the end of the tunnel, and Murray CPA is here to happily guide you through with 7 free tips for bringing down (and hopefully paying off) that unruly debt. At Murray CPA, your financial well-being is of the utmost importance to us. That’s why we offer services to individuals and businesses, to help you get back on financial track.
- Assess the Situation
Yes, this is going to be a little scary and probably a bit painful, but the plan is to get a solid grasp of where your money is going and to break it down into manageable pieces. Take it old school and use a pencil and paper, or use a computer spreadsheet, but ultimately it’s whatever is easiest for you to keep track of. Include all your payments, mortgage, credit cards, student loans, tax liens, car loans, etc.
Assessing the depth of your debt is vital in that it puts a real world number in your mind, gives you better insight into your interest rates, and helps you to realize how much your payments typically are. With this information properly laid out, you can continue on to the next tip.
- Look for High-Cost Debt Accounts
Depending on interest rates, some debts are going to cause a bigger hole in your purse than usual. The majority of these accounts are likely credit cards so take these tips into consideration:
- Don’t use high interest rate cards unless it’s an emergency
- Think about pay offing off the card with the highest interest rate while you make minimum payments on the others. Then when that’s paid off, move on to the next.
- Don’t close or open any cards. Doing so can hurt your credit rating.
- Pay on time – always.
- Call your credit card companies and try to haggle a lower interest rate. Sometimes it works.
- Cash Out Your Investments
Yeah, nobody wants to do this. But hear us out. The dollars in your investment accounts probably aren’t earning anything close to the rate of your debt interest. Which means paying off the debt is ultimately like getting that return on your investment, but without the risk, and it also helps your current situation. Paying off now can save you money in the long run.
- Get Rid of Your Gold Plated Yogurt Flakes
Ok so that might be a little overboard, but the idea is to get rid of all the unnecessary luxuries that are weighing you down. That monthly spa visit, those weekly happy hour get-togethers, that 1000-channel cable package. Do you really need it? If you’re dreading monthly payments then you need to reevaluate your priorities and focus on cutting back where it counts. Remember, it won’t be forever, just until your debt is under control.
- Pay With Cold Hard Cash
If you’re already in a bad situation, don’t add fuel to the flame by continuing to make purchases with credit cards. Instead opt to buy what you need with cash. If you can’t afford to pay it with the money you have on hand, then rethink the purchase (aside from life essentials of course).
- No Late Payments Please
Making a late payment, or completely missing one, can cause some major damage to your credit rating and accounts. Credit card companies can easily raise interest rates because of a late payment, and oftentimes, the payment just ends up covering late-fees rather than the actual balance, which means more money going down the drain. Moral of the story – don’t make late payments.
- Borrow From Yourself
Have you been able to participate in a 401(k) plan at your job? Well most plans have a feature that allows you to borrow up to 50% of the account’s value, or $50,000, whichever is smaller. Interest rates tend to be much lower than credit cards and so borrowing from your 401(k) can be a viable option. Especially because paying it back means it’s really going back into your pocket. Yes indeed, every penny paid back on that 401(k) loan goes into the borrower’s account, not the lender’s.
But just be aware. You have to repay the loan within five years, and if you leave your job prior to full repayment, then the outstanding balance becomes due immediately. If it’s not repaid, the monies get treated as a distribution to you, which means you’ll be taxed on that amount at regular rates.
If you think you’re situation might require more drastic measures, or you want the help and guidance of Certified Public Accountant, then look no further than Murray CPA. Our professionalism, friendliness, and expertise is the reason so many seek our support. Don’t worry, your debt can and will be under control, with Murray CPA. Call us at (956) 800-5600 to get the help you need.